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As early as 2014, the growth in cross-border e-commerce (CBEC) in China attracted great attention from all sectors of the society as well as a lot of overseas enterprises who are targeting the Chinese market with the support of favorable policies made by the Chinese government.
The Chinese government has implemented a series of facilitated market entry measures to aid the development of CBEC. Health foods traded through CBEC are exempted from registration and filing, which is a huge advantage compared to products entering through traditional sales channels which require costly and time consuming registration or filing. Although the Chinese health food market has huge potential and increasing customer demand for quality products, it is still beyond the means of SMEs to undertake traditional costly and time-consuming approval process. Larger companies are hesitant to proceed given the current market uncertainty including some larger companies such as GNC, NBTY, Swisse, Blackmore, etc., which perform well in China through CBEC channels enjoying great reputation among Chinese consumers but have never registered or filed with CFDA.
However, since this April, a series of new CBEC policies have been released, including the new taxation policy, two positive lists for commodities traded through CBEC, new requirements on customs clearance of entry commodity, etc., which will significantly impact much of the health foods traded through CBEC.
What will be the influences of New CBEC policies on health food sector?
Before the new tax policy is released, 10% personal postal articles tax was levied for health foods traded through CBEC (the tax below RMB 50 would be exempted), as it used to be considered as personal belongings. Currently, the tax rate for health foods has been increased to 11.9%, and the 50 RMB tax exemption policy has been cancelled.
From April 8 to 16, 2016, two positive lists for commodities traded through CBEC were co-released by 13 ministries and commissions of China, which prohibit the entry of commodities not included on the list through CBEC channels. In the first positive list, health foods were not allowed to be traded through CBEC including both nutrient supplements and food with specific health functions. In the second positive list, health foods are also included into the positive list but shall be registered or filed with CFDA prior to market entry. Meanwhile, customs clearance of entry commodity is also required identical to the requirements for products imported through general trade channels, which includes certificate of origin, contract, invoice, packing list, inspection and quarantine certificate, etc., as well as the health food approval certificate. These certificates are common to general trading, but are difficult for CEBC traders to obtain.
The “Administrative Measures for Registration and Filing of Health Foods” will soon be formally implemented from Jul. 1, 2016, which requires mandatory registration and filing of health foods entering Chinese market. The average time to undertake health food registration is two to three years for registration procedure. For CBEC health foods that have not undertaken filing or registration they will certainly have to withdraw goods from the Chinese market after the CBEC grace period ends on May 17th 2017. For health food filing, only vitamins and minerals as well as health foods using raw materials included in the approved health food raw material directory are allowed to undertake filing.
Extended reading:
A Guide to Exporting Health Foods and Supplements to China (the detailed explanation of health food registration and filing procedure)
Let’s take Swisse, an Australian health food giant as an example. Its vitamin products and calcium only require filing, which account for approximately 25% of its overall product layout. However, the remaining 75% of its products such as collagen (containing silicon dioxide) and liver-protecting tablet (containing flavone) that contain the raw materials out of the approved raw material directory will require registration.
Meanwhile, according to “Announcement to Further Regulate Health Food Supervision and Management and Crack down on Illegal Activities” released in 2013, the import of conventional foods in special dosage (including capsule, tablet, oral liquid, etc.) has been prohibited from traditional channel, which means health foods imported under the name of conventional foods have also been banned at ports.
*Notes:
Health food filing refers to the process that the applicant sends the materials related to product safety, health functions and quality controllability to food and drug administration departments for verification.
Health food registration refers to the approval process that food and drug administration departments conduct systematic evaluation and review of the application materials (safety, health functions and quality controllability) of health food registration, and making relevant decisions in accordance with the application of the applicant, as well as legal procedures, conditions and requirements.
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